Shares of technology giant Google Inc (GOOGL) dropped meaningfully Tuesday along with other tech stock favorites as the continued pressure on the overall market failed to keep its intraday bid. As a result, Google stock has now retraced back to a major line of support where, at least near-term, the odds are looking better for a good, tradable bounce.
News flow for Google stock recently focused on the company closing its Spanish news service and removing all Spanish publications from Google News on the back of a “news tax” being levied in Spain and being considered by other European countries.
Additionally, GOOGL announced last week that it will close its engineering office in Russia as the country is cracking down on Internet activity and a law now requires data about Russians remains inside the country’s borders.
While Google stock likely didn’t fall solely because of these two news events, they certainly didn’t help support the price of GOOGL and may have given some weak hands a further excuse to sell down their positions.
Google Stock Charts
Moving over to the logarithmic multiyear weekly chart of GOOGL, we see that with the weakness in recent months and particularly with Tuesday’s 3.43% drop, Google stock has now revisited its late 2008 uptrend for the first time since summer 2012. This alone does not guarantee a bounce, but if we consider that the broader indices have reached oversold levels and that the odds for a Santa Claus rally still are good, then this technical crossroad for GOOGL stock becomes of importance to watch.
On the daily chart, the drop in Google stock over the past two days took GOOGL below both its May and October lows as it dropped into a band of support (blue box) that spans from about $488 up to $520. It is notable that unlike the broader technology stock market as measured by the Nasdaq Composite, Google stock did not push to new highs off the October lows and into November but instead formed a key lower high as it found resistance at its 200-day simple moving average (red line). From a momentum perspective, GOOGL has been in oversold territory for the past few weeks, and the longer this persists the better the odds of a bounce in coming weeks.
Active investors and traders could now look out for any bullish reversals in the stock in coming days within the aforementioned support zone between $488-$520. Upon the confirmation of a failed intraday selloff or successful one-day rally, odds for a bounce back toward the $530-$540 area look good. Should the stock continue to drop and fill the gap up from October 2013 near $450, this would be the next area to look out for a tradable bounce.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
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